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For example, Indian banks might have been charged 80 basis points for 90-day funding before the crisis, 6% at the height of the crisis and below 1% now. A US regional bank might have paid as little as 30bp before the crisis, had no access to the market at the height of the crisis, and now pays more than 1%. The differential in pricing is not based on conventional assessments of risk such as credit ratings, according to John Ahearn, global head of trade finance at Citi. "A funded deal for a triple-B rated OECD credit might cost 250bp compared with 150bp to 180bp for a similarly rated emerging market credit," he says. "Is this rational pricing? Clearly a cushion is being added to account for the potential change in the cost now versus the cost in the future." Tan at Standard Chartered is equally circumspect about the pricing of OECD credit. "The differential is not justifiable in the long term," he says. "OECD pricing will fall."
see also:
Banks face up to emerging trade dilemmas
Citi: in the right place at the right time
Trade finance banks tap emerging markets growth
Basle III bears down on trade finance